I’m Behind on My Mortgage. Will the Bank Work With Me?

Maybe, and the honest answer is that “working with you” isn’t one thing. It’s four different things, they don’t do the same job to your loan, and you don’t get to pick which one lands on your file.

What Does “The Bank Will Work With You” Actually Mean?

Four options, and they’re not interchangeable.

A loan modification rewrites the loan itself, permanently. A payment deferral takes the payments you missed and parks them at the back of the loan, due when you sell, refinance, or pay it off. A repayment plan spreads what you owe across your future payments, on top of your regular bill, until you’re caught up. Forbearance pauses your payments for a while. The pause isn’t forgiveness. What you don’t pay during forbearance still comes due.

The servicer decides which one fits your file. You can ask, you can push back, but you don’t walk in and choose off a menu.

How Many People Actually Got Help Last Month?

The Federal Housing Finance Agency published its foreclosure prevention numbers for May on Thursday, covering loans owned by Fannie Mae and Freddie Mac. 15,855 foreclosure prevention actions completed, down from 17,201 in April. Inside that number: 6,616 permanent loan modifications, 5,389 payment deferrals, and 8,854 new forbearance plans started.

Those are national figures, Fannie and Freddie loans only. FHA, VA, and bank-held loans aren’t in them.

Is Forbearance the Same as the Debt Going Away?

No. Of the loan modifications completed in May, 63.1 percent involved what’s called principal forbearance: a chunk of what you owe gets set aside, stops drawing interest, and comes due later, usually when the home sells or the loan is paid off. Your monthly payment gets smaller. What you owe doesn’t.

That distinction is the whole thing to understand before you agree to anything. A smaller payment today and a debt that’s still there aren’t the same kind of help, and a servicer explaining your options over the phone isn’t always going to walk you through which one you’re looking at.

Why Did Fewer People Get Help While More Are Falling Behind?

Here’s the part that doesn’t add up on the surface. The number of loans in forbearance actually rose in May, from 37,517 to 37,644. But forbearance as a share of all delinquent loans fell, from 7.10 percent to 6.72 percent. That only happens one way: the total number of delinquent loans grew faster than the number getting help.

The 30 to 59 day delinquency rate moved from 0.94 percent to 1.03 percent the same month. Foreclosure starts kept falling, down 2.3 percent. More households are landing in the early stage of trouble, and fewer of them, proportionally, have anything in place yet.

Who Decides Which Option I Get?

Mostly, who owns your loan.

FHFA’s numbers only cover loans owned by Fannie Mae or Freddie Mac, and most people can’t tell you offhand which one holds theirs, or whether it’s either. Both run a free lookup, and both ask for the last four digits of your Social Security number to confirm it’s you, which is worth knowing before you go looking rather than after.

If your loan sits somewhere else, FHA, VA, or a bank that kept it on its own books, none of the numbers above describe your servicer’s options. The programs are different, and so is who to call.

Which of the four you’re offered, and what happens to whatever gets parked or set aside, usually comes down to two things: who owns the loan, and why you fell behind. A layoff reads differently to a servicer than an insurance jump does. That’s a conversation with your servicer, and if the paperwork gets complicated, one with an attorney too. I’m not either one.

Jacksonville, Florida is where I work, and distressed property is most of what comes across my desk. My license stops at the state line, so if you’re reading this somewhere else, a question like this goes out through the SFR® referral network to somebody licensed where you are.

If any of this is useful, I’m not hard to reach. JimArmstrong904@gmail.com, or (904) 671-4161 if you’d rather say it out loud.

Jim Armstrong, REALTOR®, Momentum Realty. SFR® (Short Sales and Foreclosure Resource) certified. This is general information, not legal, tax, or financial advice.

Momentum Realty is not associated with the government, and our service is not approved by the government or your lender.

Even if you accept this offer and use our service, your lender may not agree to change your loan.